The rare earth elements crisis

As economists focus on the Sacred GDP number, which must remain positive to maintain the statistical recovery myth, there is another crisis brewing in the world of crucial resources. In yesterday's post Energy Consumption And Progress, I alluded to the Age of Resource Competition. Today this competition is most evident in the production of rare earth elements—

There are 17 rare earth elements (REEs). They have names like lanthanum, europium and yttrium. And they're critical to a variety of high-tech products and manufacturing processes, including catalytic converters, petroleum refining, color TV and flat panel displays, permanent magnets, batteries for hybrid and electric vehicles, medical devices, and various defense systems like missiles, jet engines, and satellite components.

About 124,000 metric tons of REEs were produced in 2009, with worldwide demand during this period estimated to be 134,000 metric tons — the difference have been made up from existing stockpiles. By 2012, worldwide demand is expected to reach 180,000 metric tons while mining operations are not expected to keep up with demand in the near term.

This situation is explored in a report published by the Congressional Research Service in late July and recently posted to the Federation of American Scientists' Secrecy News Web site.

Unfortunately, there isn't much actual competition at the moment because the Chinese produce 97% of REEs worldwide, which puts the United States in a precarious position—

Critical to the discussion is the fact that 97% of rare earth element production is currently controlled by China, where internal demand is rising and interest in exporting these materials is becoming more complicated as China's leaders look to take advantage of their country's market dominance.

Rare earths are moderately abundant in the earth's crust, some even more abundant than copper, lead, gold, and platinum. While more abundant than many other minerals, REE are not concentrated enough to make them easily exploitable economically. The United States was once self-reliant in domestically produced REEs, but over the past 15 years has become 100% reliant on imports, primarily from China, because of lower-cost operations.

There is no rare earth mine production in the United States. U.S.-based Molycorp operates a separation plant at Mountain Pass, CA, and sells the rare earth concentrates and refined products from previously mined above-ground stocks. Neodymium, praseodymium, and lanthanum oxides are produced for further processing but these materials are not turned into rare earth metal in the United States.

Sound bad? Many strategically important processes & products—catalytic converters, petroleum refining, permanent magnets, batteries for hybrid and electric vehicles, medical devices, and various defense systems like missiles, jet engines, and satellite components as named above—require REEs in their construction. Things have gotten so bad that even the Congress has noticed that we're (once again) at the mercy of those wily, untrustworthy Chinese, who won't let the Yuan float—

Congressional representatives have taken notice of what some, like Rep. Mike Coffman (R-CO), are calling a crisis. In May,Coffman introduced a rare earth amendment to the National Defense Authorization Act for Fiscal Year 2011.

"The Department of Defense is facing a near-term shortage of key 'rare earth' materials necessary to support our defense weapon systems, and rare earth magnets are especially critical. ...," he said in a statement. "Today, the United States does not have a manufacturer of neodymium iron boron rare earth magnets, yet they are found in our precision guided munitions, ships, aircraft, and other critical weapons systems.”

What can be done to solve the rare earth elements crisis? We have exactly 3 choices if we're going to maintain Business-As-Usual over the longer term—

Find substitutes for REEs or redesign processes & products so these don't require them

Find new economically viable REE resources (reserves), preferably somewhere here in the Homeland or in a friendly country (e.g. Australia).

Invade China

Option #3 doesn't seem practical, so let's go with the first two. But finding substitutes (or doing redesigns) or finding new REE reserves will—at best—take a very long time to come to fruition. Worse yet, these strategies may fail altogether. That pretty much leaves us up shit creek without a paddle.

Uhmm... What would the Rational Optimist do in a situation like this? Of course, there is a 4th option I didn't mention, an option we've got considerable experience with regarding our national debt—

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